New insurance rules: What good is that for consumers?

Anyone who has taken out life insurance should receive more detailed information on the value of the policy from July 2018.

Berlin (dpa) – Consumers should be better advised in the conclusion of insurance contracts – and get more information about the value of their policy. This provides for the implementation of the EU Directive on Insurance Distribution (IDD) into German law, which has now been approved by the Federal Council.

How are customers informed about the status of their life insurance?

Once a year, they receive a letter from the insurance company, which should provide information about the value of their policy. According to the Federal Government, however, around a quarter of the communications have so far been incomplete. That should change from July 2018. “Consumers who invest their money in capital-forming insurance, finally have more clarity on their claims,” ​​argues Dorothea Mohn, head of the team financial market of the Federation of Consumer Organizations (vzbv).

What changes in detail?

The insurance companies are required to inform their customers about the surrender value of life insurance, among other things. In addition, the sum that will be paid after the continuation of the contract and the amount that customers would receive if they do not pay any further insurance premiums must be mentioned. “With the new mandatory information, insured persons can actually make financial decisions, such as keeping or selling the policy based on their status announcement, starting in the summer of 2018,” says the chief actuary of Policen Direkt Group, Henning Kühl.

The company that buys insurance contracts has been scrutinizing numerous releases in the past. A downside from Kühl’s point of view: the insurers have to call existing customers only on request the sum of the contributions paid so far. Kühl would have wanted an automatic info for policies from 2005, as they should apply to new contracts from 2018.

Which further innovations are there?

Consumer advocates have long been calling for a reform of the controversial residual debt insurance. When banks lend, they often demand that the customer take out such insurance. This occurs when the borrower becomes unemployed or dies. However, residual debt insurance is usually expensive. “There are increasingly cases in which banks sell consumers expensive residual insurance, although the insurance coverage is not required to the extent or not at all,” the Parliamentary State Secretary in the Federal Ministry of Justice, Ulrich Kelber (SPD), had recently criticized the “Tagesspiegel”.

Consumers must be fully informed in the future, in particular about the costs and with the indication that the insurance is taken out voluntarily and not linked to the loan. The right of withdrawal has been extended. However, Mohn criticized that the new regulation fell far short of expectations. The insurance may continue to be sold together with a loan: “The policy has missed a chance to stop the often questionable practice of distribution of residual debt insurance.”

What is still controversial?

Consumer advocates had hoped for a clear separation of fee counseling and commission sales. However, mixed forms are still possible. Mohn demanded to increase the remuneration of insurance brokers on a fee basis. This ensures that consumer interests are placed at the center of the consultation. There has been a lot of criticism in the past that insurers would pay agents – at the expense of returns – good commissions when selling their products. The Confederation of Insured spoke with regard to the law of “label fraud”. The industry association GDV sees in the law, however, a “balanced set of rules for insurance distribution.” This also includes the further training obligation for insurance intermediaries.